Series 7 Exam Question 382: Answer and Explanation

Question: 382

Which of the following best describes the tax status of a limited partnership?

• A. The partnership is fully taxed.
• B. All tax liability flows through to the limited partners.
• C. Any income generated is taxed as ordinary income.
• D. Any gains generated are taxed as capital gains.

Correct Answer: B

Explanation:

B. A partnership flows through passive gains, losses, and income to investors each year.